okay, personal finance thread. this is just the basics, oriented toward americans trying to retire. i advocate passive indexing. it's what financial advisors do for their own money. if you have any questions feel free to ask or dm me. this does not constitute financial advice.

skeptics of financialized capitalism (myself included) have more reason to invest, not less. when there is a paradigm shift like the industrial or russian revolutions, it is the poor that get fucked. the rich get out or make out. alternative investments will be discussed later.

1. define your retirement spend. in most cases, your big item is retirement. figure out what you would want to live on in retirement per year. overestimate lumpy costs. assume no social security. leave space to cut back. we'll use $60k, the median income in the US.

2. pick your retirement age. if you want to retire around 65, multiply it by 25 (4% withdrawal rate). this is because your lifespan is relatively short and expenses lower due to declining vitality. otherwise multiply it by 33 (3%). that's your target. we assume the former, $1.5M.

3. estimate your tolerance for loss in the portfolio. only you can know this. what loss can you take in a week and not care? 50% is the typical maximum. if the answer is 0-20% you should not invest at all. we'll use 35%, a fairly typical tolerance. being wrong is expensive.

4. a brief pause here. the biggest obstacle to individual financial success is the investor panicking and selling at the bottom. your investments should be chosen for what you can stomach losing, not what you want to gain. if you want more in retirement, save more.

5. predictions hover around 7% real equity returns forever. we'll say 5% and no return on bonds at all. double your tolerated loss above. that's a good target for your stock %. multiply that by 5%. that's your annual return. we picked 35%, so 70% equity or 3.5% return.

5. now, the amount you have to save to get to $1.5M at 3.5% return is just math. we'll assume we're 25. we have 40 years until we're 65, so we need to save "only" $1,500/mo, less than the current 401k max. you can calculate your own here. https://www.bankrate.com/calculators/retirement/investment-goal-calculator.aspx

6. that is the ultra basics. i'm going to pause here and see if anyone even reads this far before i get a bit more into the weeds if people want.

7. alright so how to actually save $1,500 a month. there is one secret and one secret only. Pay Yourself First. don't let the money into your accounts at all, direct deposit it right into retirement accounts. once you meet your savings goals, you pay your bills, spend the rest.

8. what to actually invest in for equities? index funds. vanguard's VTWAX or VTSAX are sound choices. why? low costs reduce performance drag. active investors, on average, do not reliably generate enough alpha to offset costs and taxes.

9. what to actually invest in for bonds? index funds. same basic reason as above. the precise details of which are a nightmare of theory. short story, invest in intermediate term bonds or treasuries. do not ever under any circumstances invest in bonds for return.

10. do not carry debt, except a mortgage. it will destroy you. get out from under any debt however the fuck you have to. no amount of rice and beans is too much to be free from creditors. only take student debt if in a highly employable field making ~$100k/yr within 5 years.

11. i dislike alternatives. REITs, crypto, timber, whatever. personal finance should optimize for lose-less, not win-more. by definition, alternatives are betting on a huge upside. if you must, limit it to 5% of your overall portfolio and take it out of the equity side.

12. if you can't control your spending with a credit card, if you spend more than you mean to, cut it in half and stop. get a debit card, hell, just withdraw cash weekly and use that. that cashback or those airline miles are profitable for them. they make people spend more.

13. cook at home more. it's a useful skill and people find it sexy. you'll also save money, lose weight, feel better, and it's fun.

an added bonus is that you often discover how better to manage your diet. what you feel better eating or not, how much sugar/salt you eat.

14. obligated spending is a sure way to go waste money. there is a reason every corporation wants you on them. most people don't even use what they buy. cancel all your subscriptions for a month. see what you actually miss.

15. use your tax-advantaged and tax-deferred space. it's as close to free money as we get in the US (covid stimulus notwithstanding). most of this is your 401k or IRA. i am willing to sit down with literally anyone who wants someone to talk to about this.

16. if you are low-income, please for the love of all that is holy check if you are eligible for saver's credits. it is one of the least-utilized ways for low-income people to build a humane retirement for themselves. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit

17. one home-ownership benefit that is little spoken of is the significant reduction in your need for cashflow. with the current tax regime, that means a significant reduction in your tax burden. also, the tax breaks on mortgages are still significant.

18. on home ownership, it is far cheaper than you may imagine. 10% down and 3.5% makes for an all-in mortgage cost that you can probably afford. if you're poor, or the first in your family to own a home, or disadvantaged for any number of other reasons, there is help.

19. build an emergency fund. 3-6 months of your typical expenses. don't put it in a money market fund like so many tell you. put it in an FDIC-insured bank. never touch it, it's not there to make you money, it's there to help you sleep and avoid making financial mistakes.

20. don't be cheap on things that matter. buy high quality objects that last. spend on a good bed, shoes that don't make your feet hurt, kitchen implements. if you must buy a car, buy a used and reliable japanese import. otherwise, a bicycle is cheaper and healthier.

21. if you get a significant windfall due to inheritance, put it in the bank or a money market fund while you deal with your grief. then it invest it like all the rest of your money. maybe give some away to charity.

22. if your partner does not handle finances, write everything down and make sure they know where the record is. if you get hit by a bus, you do not want them to have to figure this stuff out on top of grief. include messages about how much you love them.

23. if you must use a financial advisor, use a fee-based advisor. anyone that charges a % AUM is a bloodsucking reprobate of the lowest kind. they should all be shot into the sun. ask them where all their investor's yachts are sometime, see how quick they run.

24. if you are anticapitalist, put your on your own mask before helping others with theirs. you can save a reasonable amount for yourself and still help others. if you can retire early, you can dedicate real time and money to fixing things rather than doling out palliatives.

25. social or ethical investments don't work. they just drive up return for people that invest in unethical firms. the way to drive corporate behavior is spending and word of mouth recommendations. give firms/individuals you support free advertising.

26. if you have religious prescriptions that bar you from investment in the stock market, there are alternatives. you likely already know them. but frankly, their returns are abysmal. you are better off becoming a landlord or small business owner, but that's a lot of work.